Friday, June 27, 2008

Early close on Lascelles deal - Angostura to pay off shareholders July 28 - Wants to take advantage of synergy

Published: Friday June 27, 2008

Angostura will pay off early the former shareholders of Jamaica's Lascelles deMercado Group it acquired in Jamaica, a move which the Trinidad-headquartered drinks company says will give it an early start in taking advantage of the synergies offered by the acquisition.

"There are many interesting opportunities," said Michael Carballo, the executive director of Angostura, which is a member of Lawrence Duprey's CL Financial Group. "We want to work those synergies," he told the Financial Gleaner.

The company will do so with William McConnell still at the helm of the company, Carballo said Wednesday, immediately throwing out any suggestion of management changes at the conglomerate and its subsidiaries.

Not as clear was how the company's board would fare.

Carballo said that is a discussion to be had with Lawrence Duprey, chairman of CL Financial, Angostura's and soon Lascelles' ultimate parent.

Seat on board

Duprey already has a seat on the Lascelles board. The early closure of the deal reprices the acquisition at US$9.25 per share, down from US$10.65 originally offered.

Angostura had paid down US$4.50 per ordinary share for the more than 68.6 million, or the approximately 39 per cent of Lascelles' voting rights and have up to the end of January 2011 to pay a remaining US$6.15 per stock unit.

But the company this week told the Jamaica Stock Exchange that it will close the debt on July 28, paying shareholders US$4.75 per ordinary stock in keeping with the pre-arranged discount that was set out in its offer document.

People who took up Angostura's offer of US$0.20 a unit for their six per cent Lascelles preference shares will also receive their outstanding half of their payment at the same time.

The final price values the Lascelles stock at about $560 per share, an approximate $70 premium of yesterday's closing price of the LAS stock on the JSE.

"Cheques will be issued to accepting shareholders no later than July 28 through Citibank in accordance with the terms of the offer," the stock exchange said in a posting on Wednesday.

This will clear the way for Lascelles' two top bosses, chairman George Ashenheim and managing director Billy McConnell to hand over 46.6 per cent of Lascelles' voting shares, which they jointly hold in a vehicle called Calla Lilly, for J$2.

It will give Angostura, which is spending an estimated US$685 million on the acquisition, approximately 90 per cent of Lascelles, when the stake it held prior to the take-over is taken into account.

World-famous bitters

Angostura manufactures a world-famous bitters by the same name and also manufactures and distributes rum and other spirits in Trinidad and Tobago, Europe and the Americas.

Lascelles is a multi-faceted conglomerate, but its crown jewel is J. Wray and Nephew, a rum distiller that owns the coveted Appleton brand, one of the fast-growing rum brands at the higher end of the market.

Duprey has already talked of leveraging Angostura's distribution muscle to extend Appleton's global reach.

There have been other suggestions that the distilling and blending of Angostura's rum brands could move to Jamaica as part of the efforts to achieve economies of scale.

Distribution rights

Carballo said Wednesday that the distribution rights for Angostura Bitters and some of the company's prime rum brands have already been transferred to Lascelles.

More shifts are likely to occur, Carballo suggested, but those decisions will be made after July when Angostura closes the acquisition deal.

Carballo said, however, that alongside the spirits operations, Angostura would be holding on to the distribution businesses and Globe Insurance.

"We are keeping the distribution businesses for sure," he said.

"We are impressed with both Globe and distribution."

Indeed, the insurance company, he said, is to be expanded, or possibly merged into CL Financial's insurance operations, which have significant shares of eastern Caribbean markets.

Still, Carballo said while disposal of the other businesses was not off the cards, and that "significant expressions of interest" had come from companies in Jamaica and Trinidad, Angostura would make no decisions immediately on what would go.

For now, he said, "nothing changes."

Similar objectives

In its recently released annual report for last year, Angostura told shareholders that Lascelles was not only a strong company, but that Jamaican firm's objectives was in keeping with its own.

"Lascelles deMercado is a widely diversified group, rich in heritage, with an extremely strong balance sheet and excellent leadership and management team, second to none, focused on building brands and creating shareholder value, totally in sync with our overall core objectives."

In that report, Angostura said that once the acquisition is complete, it will directly control about 20 per cent of Lascelles, with other CL Group subsidiaries having stakes in proportion to their contributions to the financing of the deal.

But how this arrangement will affect the long-term structure of Lascelles was not immediately clear, although there seemed to be no immediate plan for the break-up of the group.

Carballo repeated early assurances from Duprey and McConnell himself that the Lascelles CEO would stay on, despite the planned early closure of the transaction.

"Mr McConnell is to remain; we have a great relationship," Carballo said. "We love Mr McConnell."

Source: Jamaica Gleaner

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